Sky’s UK operation has reported its best subscriber growth and lowest rate of customers defecting to rivals in more than a decade.
Jeremy Darroch, the chief executive of Sky’s enlarged European operation, said the UK and Ireland operation produced the “stand-out performance” in its results for the three months to the end of March.
Total revenues across Sky’s European business grew 5% to £8.45bn in the nine months to the end of March. Group profits rose 20% to £1.02bn, a 20% year-on-year rise over the nine-month period to the end of March.
The UK and Ireland operation accounted for more than £1bn of the profits, Italy grew profits by £5m to £45m, while the German operation reduced its loss by £43m year on year for the nine-month period.
Sky’s UK operation added 127,000 new customers in the company’s third quarter, a 41% increase year on year and the best rate of growth in 11 years for that three month period.
The number of new TV customers, either new subscribers to its traditional TV service or internet operation Now TV or existing customers adding it to their package, grew by 94,000 in the quarter.
UK broadband customer numbers, again either new to Sky or existing customers adding it to their package, rose by 100,000 in the third quarter, a 43% year-on-year increase.
The churn rate in the UK, the proportion of customers leaving Sky, dropped to a low of 10.1%, although the company recently announced price rises of up to 4%.
“The UK and Ireland delivered a stand-out performance, reporting both the highest customer growth and lowest churn for 11 years,” said Darroch. “We took share in broadband and grew strongly in TV as our dual-brand strategy with Now TV and Sky continues to deliver”.
Darroch added that the Italian operation also produced its best performance in the third quarter for three years, while Germany also produced record growth in the quarter.
Sky’s share price rose 5% in early trading on Tuesday as city analysts delivered a positive reaction to the financial results in notes to investors.
In a call with media, Darroch was asked if the rise of the more budget-focused Netflix posed a threat to Sky.
“Netflix has been in the UK for a few years now and both [of us] have continued to grow well,” he said. “It would be wrong to characterise [Sky v Netflix] as an either/or [choice]. Look at what we are doing in terms of box-sets and the on-demand proposition we have built up. It is strong. I can’t see why we won’t continue to grow strongly and others will as well. It is not about dividing up the pie, it is about growing the pie.”
Sky said there were more than 300m downloads of programmes on its on-demand service in the third quarter, a 63% year-on-year rise.
Within this, there were almost 100m views of Sky box-sets, a quarterly record, with shows such as The Walking Dead, Grey’s Anatomy and Game of Thrones proving hits.
Average revenue per user (ARPU), a key metric watched by analysts, has remained almost flat for the last seven quarters at £47 per month in the UK.
Andrew Griffith, Sky’s chief financial officer, admitted that the growth of Now TV, which is much cheaper than taking a full TV subscription, is “slightly dilutive” to ARPU.
However, he added that it was not a significant factor, or concern, and that with continued overall subscriber growth, ARPU increases would follow.
“There is always a little bit of a lag in ARPU behind customer growth, particularly when you are growing strongly,” he said. “That is the important thing”.
The company also said it remains on track to hit £200m in annual savings by the end of the second year of the newly created Sky business across Europe.
